Mark Daniels, head of football at Portland-based Adidas America, says big investments in college athletic programs are part of a strategy to “own the campus.” The goal is to create brand loyalty for all company products.

In 2002, Nike agreed to pay the University of Alabama $100,000 annually for the right to outfit the school’s legendary football team. The deal included roughly $1 million per year in equipment and apparel.

Those figures have mushroomed since the Crimson Tide ripped off a string of national titles. The bond between Bama and Nike now extends far further than even the school’s rabid fans likely realize:

• After the Tide won the national championship in 2010, Alabama renegotiated its Nike deal. The new deal included $1 million for the personal discretion of then-Alabama President Robert Witt. The Crimson Tide Foundation, the nonprofit arm of the athletic department, also got a $1 million bonus.

• Alabama players will receive nearly $2.7 million in Nike shoes, T-shirts and socks this year. That doesn’t include $100,000 set aside for outfitting Alabama athletics staff, which also is required to wear Nike shoes and apparel.

• The university’s “upper-level administrators” are now contractually bound to wear Nike gear at public events, seemingly mandating the use of Nike golf clubs when officials hit the links with big donors.

• Nike gets 10 tickets for each home football game and 50 tickets to one agreed-upon home game. The seats must be field level between the 30-yard lines.

• Crimson Tide athletes are forbidden from covering up the Nike logos on any of their athletic gear, meaning that even a pre-game ankle-taping job done to prevent injury can void a contract worth millions of dollars.

Alabama’s deal with Nike, lavish as it is, is not unusual.

Similar contracts exist at universities across the country. Nike, Adidas and Under Armour alone will likely pour more than $250 million into college sports coffers and locker rooms this year, according to a Business Journal investigation.

“To say in a contract that (administrators) have to wear specific clothes, that’s getting into new territory that starts to create questions,” said Nancy Lough president of the Sport Marketing Association and a professor of higher education at the University of Nevada Las Vegas.

At a time of increasing controversy about the big money that feeds amateur college athletics, the arrangements also highlight the enormous, and still increasing, influence of the three biggest apparel brands on college campuses.

The deals give sporting goods companies unparalleled access to facilities and athletes, thousands of tickets and sideline passes, opportunities to put logos on everything ranging from volleyball nets to golf visors and a lofty pedestal from which to squash smaller competitors.

In return, the companies get the kind of ubiquitous exposure that drives an astounding level of consumer spending and loyalty.

Deals like Alabama’s trace back to Sonny Vaccaro, the one-time Nike “sneaker pimp” charged with getting top amateur athletes to wear the company’s shoes.

Vaccaro was sitting in a black recliner watching college basketball at his Santa Monica home in 1988 when University of Miami attorney Robert Ades called.

Ades asked Vaccaro if Nike would be interested in putting its shoes on all of Miami’s athletes. Until then, each team arranged its own shoe deal.

Vaccaro’s reaction: “Now we own the school.”

The deal gave Nike access to the university’s locker rooms and also opened up the entire campus to Nike’s sales reps, including the bookstore, creating dozens of new sales channels and an unrivaled platform from which to sell shoes and apparel to students, fans and alumni.

The Miami deal served as a template for today’s university footwear contracts.

After he spoke to Ades, Vaccaro quickly called Nike co-founder Phil Knight.

“I said, ‘This is it, we hit the motherload. Now we own the school.’ I made that statement and Phil agreed.”

GENERATING BUZZ

University leaders say such deals are necessary in order to remain competitive in the cutthroat world of college sports. Without the money, athletic departments would face bigger operating losses and fall behind in the race to recruit students who increasingly want to cheer for a competitive football team.

A USA Today report this year found only 23 of the 228 programs in the NCAA’s top division generate a profit, making the money doled out by Nike, Adidas and Under Armour a lifeline that can stir up application-generating buzz and mean the difference between a winning and losing season.

Donations, TV contracts and ticket sales still make up the bulk of athletic department revenue. Sports apparel deals typically account for less than 5 percent.

“There’s some decent money in some of these contracts but compared to some of the other sources it’s not much money,” said Kristi Dosh, an ESPN sports business reporter and author of “Saturday Millionaires,” a book about the business of college football. “It’s not anything life-changing.”

The University of Oregon athletic department operates at essentially a break-even point, even with a Nike contract that will provide $2.2 million in equipment and $600,000 in cash this year.

Athletic director Rob Mullens said the value of the deal goes beyond cash and apparel.

Phil Knight graduated from the university and it has become a beachhead for Nike’s never-ending roll out of uniform and other technology. As such, Nike’s values — speed, style and innovation — have become synonymous with Oregon athletics.

“(Nike is) the absolute cornerstone, or foundation, or whatever phrase you want to use, to describe the University of Oregon athletic brand,” Mullens said.

Since the football team rose to prominence five years ago on the back of then-head coach Chip Kelly’s high-octane offense, licensing revenue has climbed from $750,000 to $3.75 million annually.

The benefits have spilled over to the academic side of the university. Although Kelly has since left for the NFL, the average GPA of the university’s entering class — athletes and non-athletes alike — has climbed from 3.48 to 3.57 since Kelly was named head coach in 2009. The mean SAT score climbed from 1103 to 1108.

Most importantly, the percentage of non-resident students climbed from 35.5 percent to 45.2 percent.

In the wake of declining state support for higher education, such students are coveted because they pay higher tuition and fees.

Out-of-state students pay $629 per credit hour, three-and-a-half times more than in-state students.

‘IT’S ABOUT THE BRAND’

The deals offer an unparalleled stage for showcasing shoe and apparel technology.

“Phil (Knight) had the foresight to understand this is how you get to the public,” Vaccaro said. “You showcase your materials, whether it’s jerseys or shoes.”

It’s also a relatively cheap way to showcase products. A 30-second commercial during last year’s national championship football game cost $1 million, according to AdWeek. For its roughly $3.4 million in support, Nike’s products were on TV the entire game.

Nike has grown from a $1.2 billion company in 1988 — the year of its first all-school deal — to a $25.3 billion company today. It declined to make an executive available for an interview.

Mark Daniels, head of football for Portland-based Adidas America Inc., said the goal of an all-school footwear contract is to build sales across all channels — not just football, but casual footwear, running, basketball and apparel.

“It’s not about selling more football shoes,” said Matt Powell, a footwear and apparel analyst with SportsOneSource. “It’s about the brand.”

Adidas, which signed its first all-school deal in 1995 with the University of Nebraska, has assembled a lineup of some of the most tradition-rich programs in college football, including Notre Dame, UCLA and Tennessee.

For the past two years, the Adidas strategy has been to choose one football game per year for each of the schools and “activate the heck out of it,” by designing a unique uniform and promotions.

The big splash often includes a giant party for footwear executives.

Each contract reviewed by the Business Journal includes a provision for a company-day on campus which typically includes 50-60 seats for executives in field-level seats between the 30-yard lines.

Under Armour goes even further and requires universities to help executives find hotel rooms.

In addition, the companies get around a dozen tickets for each home game.

“It’s part of owning the campus,” Daniels said. “You want to have your own people invested in these schools as much as the schools are invested in Adidas.”

Daniels said the days — often sales rallies — feature a visit with a key athletics official, such as the head football coach or athletic director.

Under Armour is the latest entrant to the game.

It’s locked up several college programs — Auburn, the University of Maryland, the University of Utah and the University of Hawaii — that mirror its image as a scrappy up-and-comer.

It’s also putting the biggest bonuses for winning in the history of college sports.

The University of Utah is guaranteed a $600,000 bonus if it wins the national title in football, dwarfing what Nike owes Alabama ($100,000) if it walks away with the crown.

“The three big brands are trying to one up each other,” Powell said.

CONTRACTS ON STEROIDS

As the business of college sports has grown, simple contracts that once guaranteed a full-page ad in the program and signage in the stadium have morphed into complicated deals that mandate links on websites, parking passes, corporate hospitality tents and logos on goal posts and equipment trucks. Many of the contracts even give shoe companies the right to use university facilities for events.

Perhaps most troubling, the deals increasingly deprive smaller brands of a chance to play on the big stage.

Most contracts reviewed by the Business Journal were signed years ago when numerous sporting goods companies supplied universities. The Big Three are elbowing those companies out.

Nike’s 2000 deal with the University of Texas, for example, mandated that the university must at least field-test Nike products after pre-existing agreements expired with Rawlings, Wilson, Authentic Fitness Corp., Hillerich & Bradsby Co. and Easton Sports.

“We have this model and what appears to be some monopolizing going on,” UNLV’s Lough said. “For the sporting goods manufacturers that are smaller and niche, either Nike has enough money and can put them out of business or buy them. Is that a good thing? No. Not necessarily.”

Fast Fact

In advance of Saturday’s kickoff to the college football season, the Business Journal filed public records requests for copies of the footwear and apparel contracts for each of the 125 universities that field a team in the Football Bowl Subdivision, the top tier of college football. Visit portlandbusinessjournal.com for details about specific university contracts.

A nike School: University of Oregon

Oregon’s contract with Nike runs through 2018.

The Washington County company will provide the university with $2.2 million in equipment and apparel this year. Nike will also pay the university $600,000 in cash in exchange for the right to outfit its athletes.

An adidas school: university of Wisconsin

Wisconsin’s contract with Adidas runs through 2016.

The company, which has its North American headquarters in Portland, will pay the university $800,000 in cash this year for the right to outfit Wisconsin athletes. Wisconsin will also receive $1.325 million in product.

The Civil War (of footwear deals)

Oregon and Oregon State are rivals on the footwear field, but when it comes to sneakers the Beavers and Ducks play for the same team: Nike.

Not surprising given its lineage as the birthplace of Nike, the University of Oregon has long been a beachhead for the sneaker company’s tweaking and experimenting with university footwear and apparel deals. Now that it’s seemingly perfected the formula, other schools are getting deals similar to Oregon.

Oregon State is among them. In 2006, Oregon State got $316,500 in Nike product. That same year, Oregon got $1.4 million.

In September 2011, Oregon State extended its all-school athletic deal with Nike through 2019. The terms of the agreement are now similar to the University of Oregon’s, except Oregon State no longer gets annual cash compensation from Nike in exchange for putting athletes in Nike uniforms and shoes.

Industries:

Comments

If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.